Foreign Relations of the United States, 1958–1960, Western European Integration and Security, Canada, Volume VII, Part 1

48. Airgram From the Embassy in France to the Department of State⁰

Paris, January 26, 1959.

G–985. Deptel 2360 (rptd info Luxembourg Luxco 148, Brussels Busec 83).¹ While it is too early to forecast with any assurance role of France in European integration for next few years, certain comments can be made at this time.

1. In absence of a severe economic and financial program including devaluation, French participation in the Common Market could only have been possible via wholesale utilization of escape clauses and/ or continuing external aid.

2. While the Pinay–Rueff² policies decreased trade restrictions regarding both Europe and the dollar area, the major motivating force was not desire to move away from protectionism. Deciding factor was internal price considerations. Pressure for liberalization came from Bank of France and Ministry of Finance (both of which were more concerned with internal price considerations than with international commitments)—not from the Foreign Office. Durability of these moves away from protectionism depends upon success of economic and financial plan. Trade moves so far essentially put France in compliance with her international commitments, which does not necessarily imply French assumption of more liberal commitments in future.

3. Financial and economic program is “Gaulliste” in fullest sense of word. It takes as “given” De Gaulle’s concept for French grandeur—e.g., military and economic effort in Algeria, atomic energy— and makes bold bid to achieve economic and financial stabilization notwithstanding these ambitious and costly projects.

In such measures as widespread revision of social security system, junking of mechanisms for indexation of wages and prices, curtailment of veterans’ pensions, treading on toes of agriculture and trade liberalization, French plan goes to lengths which only De Gaulle with his enormous prestige would have dared to envisage. The successful execution of the plan depends to a considerable degree on that prestige. It is the financial and economic embodiment of De Gaulle’s call to French people to restore greatness of France. Program is well within economic capacity of French nation to support, but test will be whether population prepared to abide by decisions De Gaulle has made re utilization of the nation’s resources—i.e., whether French people will heed his call.

We question whether it was explicit awareness of historic forces calling for European integration that led De Gaulle to accept French participation in European institutions. However, De Gaulle has now recognized that Europe needs continued close Franco-German relations and that Common Market aids in achievement of this desirable objective. We understand that he advised Germans that Common Market approach should also be fruitful re future developments. Thus when he states he will honor agreements regarding Europe he recognizes not only the agreements but also, to a considerable extent, the objective. It is true at the same time he has continued to state his opposition to supranational European institutions. We are inclined to feel, however, that his support of close Franco-German relationship is not simply a passing phase related to current need for France to lean heavily on Germany for economic and financial support and that his lack of enthusiasm for European institutions of the Six will not be determining factor.

While it is generally assumed that Debré will act in this and other matters in accordance with De Gaulle’s will, it is nevertheless true that Debré has not retracted his earlier pronouncements against Rome Treaty and in fact has said privately—apparently repeatedly—that he feels the treaties should be renegotiated. It is clear that Debré (who admires Erhard and Eccles!) wants a wider, looser, association in Europe including Britain and presumably the other European countries.

It would appear that Debré’s opportunities of renegotiating Rome Treaty are limited. There was however a different way that his objective could be reached—namely by globalizing the 3% of national production quota provisions to include the other OEEC countries. This would have eliminated only remaining item representing differences of treatment within Common Market and rest of OEEC area. Thus by accepting a British or compromise proposal the unity and integrity of the Six could have been considerably weakened. However, it appears clear that France, supported by Germany and Italy, has held firm against any compromise which would dissolve last unique aspect of the Common Market. Debré presumably realized potentialities for action in this regard but either could not or did not wish to act accordingly.

The French have believed for some time (see Embassy Despatch 1147 December 24, 1958)³ that it would be easy for France to work out an agreement on 3% with British and other European countries which would be advantageous to France on strictly commercial basis. Thus remaining element of “discrimination” between Six and Eleven could be removed if British proposal were considered merely on basis of commercial advantages. In our view, however, French are unlikely to cast aside basic political objectives in order to accommodate British in this regard.

As this Embassy has often noted in past reports, we feel that there is a real danger to the United States and other outside areas in a move towards a wider looser association. We feel such a move would lack political and economic advantages of unity of the Six and at the same time would extend and make more durable various types of discrimination against the dollar and other trading areas. We feel this danger is rather greater in the near future if pressure were exerted upon the Common Market countries to give up the remaining element which establishes the integrity and coherence of the area.

The French economic and financial program, possibly with some modifications, must succeed if the European integration movement is to progress in years that lie immediately ahead. We would caution, however, against excessive optimism concerning implications of this policy on such matters as general commercial and agricultural policies and especially regarding anti-cartel provisions. Ultimately we feel that Common Market itself will tend to induce France to accept increased competition and more liberal commercial and agricultural policies. However, as indicated above, recent actions should not, in our view, be regarded as a step recognized and designed to lead ever farther away from protectionist and other nationalist policies. As for the cartel aspects, this seems to us even more unclear. We are not yet aware of details of agreements being worked out so assiduously by German and French industrialists under sponsorship of French Patronat. However, with all this enthusiastic activity, it would be surprising if certain private restraints of trade are not in being, and more being born. Consideration of cartel implications should take into account fact that Patronat support for Common Market was essential for ratification. This support would have been less likely in event close cooperation with Europe— and especially German—industrialists had not been making progress. Ultimate judgment re current arrangements should reflect whether they develop into hard long term cartels in restraint of trade or whether at least the restraining aspects are of a more temporary or transitional nature.

While in our view too much optimism regarding future policies should not be assumed on basis of French economic and financial program, situation can be viewed in a different manner. Recurring economic and financial crises, delayed and inadequate devaluations, formidable and highly discriminatory obstacles against foreign trade, and general prospect of continuation of these conditions made France weak link in move towards European integration. This condition existed despite highly modernized industry (at least in large concerns), adequate supply of scientists, technicians and skilled workers, excellent geographical position, rich natural resources and vast sums of gold and foreign exchange in private hands. Problem was to achieve economic and financial stability and to open this economy to increased internal and external competition. Only by such a development could real progress be expected in terms of high cost structure reflecting many uneconomic small and medium sized producers and archaic and costly distribution system.

Primary requirement for corrective measures was political stability which would allow development and implementation of government economic and financial programs designed to bring forth fundamental corrective influences. But more was needed. Some lever was required to gear internal corrective measures to world conditions and competition. That lever was supplied by the Common Market and its convenient deadline of January 1, 1959 for action on quotas and tariffs.

While, as pointed out above, the most important consideration in France’s move towards increased liberalization of trade vis-à-vis the OEEC and other areas was internal price considerations, nevertheless it was the necessity for action under the Common Market that initiated the far reaching plans—internal and external—that made this wider liberalization possible. Thus, in our view, the Common Market has already justified much of its earlier promise by being the immediate element that helped France make a reality out of what had become a possibility. Needless to say, further progress will be required if France is to play a constructive role in building a stronger more united Europe. However, the first step has been accomplished and it is the political stability provided by De Gaulle plus the immediate issue of the Common Market that allowed or dictated this step.

In summary, we feel it premature to attempt to estimate ultimate path of French policy on European integration. Historic forces are surely on side of progress, but vested personal views, long entrenched protectionist sentiments, and exaggerated concepts of national pride still exist. For the moment, further progress depends upon the success of the French economic and financial program.

Houghton

0. Source: Department of State, Central Files, 840.00/1–2659. Confidential. Repeated to Bonn, The Hague, Rome, Brussels, Luxembourg, London, Vienna, Bern, Oslo, Stockholm, and Copenhagen.
1. Telegram 2360 to Paris, January 7, requested the Embassy’s views on De Gaulle’s impact on European integration. (ibid., 840.00/1–659)
2. Antoine Pinay, French Minister of Finance and Economic Affairs, 1958–1961; Jacques Rueff, chairman of a committee established by De Gaulle in October 1958 to study France’s financial situation.
3. Despatch 1147 transmitted a memorandum of a December 23, 1958, conversation between Tuthill and Wormser in which the French diplomat outlined his government’s suspicions of British objectives in the OEEC. (Department of State, Central Files, 440.002/12–2458)